Crypto ETF Tax Guide for Canadians: TFSA, RRSP & Capital Gains

How Are Crypto ETFs Taxed in Canada?

Bitcoin and Ethereum ETFs are taxed the same as any other ETF or stock in Canada. The tax treatment depends on which account type you hold them in.

Disclaimer: This is general information, not tax advice. Consult a qualified tax professional for advice specific to your situation.

Account Type Tax Summary

Account Type	Capital Gains	Distributions	Best For
TFSA	Tax-free	Tax-free	Most investors
RRSP	Tax-deferred	Tax-deferred	High earners
RESP	Tax-deferred	Tax-deferred	Education savings
Non-registered	50% taxable	Fully taxable	Overflow

TFSA: Tax-Free Crypto ETF Gains

The Tax-Free Savings Account is the best place for crypto ETFs for most Canadians.

Benefits

• No capital gains tax: Sell at any profit, keep 100%
• No tax on distributions: Any ETF distributions are tax-free
• No annual reporting: Gains don’t appear on your tax return
• Flexible withdrawals: Take money out anytime without penalty
• Contribution room restored: Withdrawals add back to next year’s room

Example

Scenario	TFSA	Taxable Account
Investment	$50,000	$50,000
Value after 5 years	$100,000	$100,000
Capital gain	$50,000	$50,000
Taxable amount	$0	$25,000 (50%)
Tax (40% bracket)	$0	$10,000
Net proceeds	$100,000	$90,000

TFSA advantage: $10,000 more in your pocket.

2025 TFSA Contribution Limits

Year	Annual Limit	Cumulative (since 2009)
2025	$7,000	$102,000
2024	$7,000	$95,000
2023	$6,500	$88,000

Check your available room on CRA My Account.

TFSA Warnings

Don’t day trade: CRA may consider frequent trading as carrying on a business, making gains taxable. For crypto ETFs:

• Buy and hold = safe
• Occasional rebalancing = safe
• Daily trading = risky

Don’t over-contribute: Excess contributions are penalized at 1% per month.

RRSP: Tax-Deferred Growth

Registered Retirement Savings Plans offer tax deferral, not tax elimination.

How It Works

1. Contribution: Deduct from taxable income today
2. Growth: No tax while inside RRSP
3. Withdrawal: Taxed as regular income

Benefits

• Tax deduction now: Reduce current year’s taxes
• Tax-free compounding: Grow without annual tax drag
• Lower tax at withdrawal: If you’re in a lower bracket in retirement

Example

Stage	Amount	Tax Impact
Contribution	$20,000	Save $8,000 in taxes (40% bracket)
Growth over 20 years	$100,000	No tax during growth
Withdrawal	$120,000	Taxed as income

When RRSP Makes Sense for Crypto

• You’re in a high tax bracket now (>$100K income)
• You expect lower income in retirement
• Your TFSA is already maxed out
• You want the immediate tax deduction

RRSP vs TFSA for Crypto

Factor	TFSA	RRSP
Tax on growth	Never	At withdrawal
Best for volatile assets	Yes	Depends
Contribution flexibility	Full room restored	Room lost when withdrawn
Access before retirement	Easy	Penalties apply

Recommendation: Max TFSA first, then use RRSP.

Non-Registered (Taxable) Accounts

If your registered accounts are full, you’ll hold crypto ETFs in a taxable account.

Capital Gains Tax

When you sell crypto ETF shares for a profit:

1. Calculate gain: Sale price - Purchase price - Fees
2. Inclusion rate: 50% of the gain is taxable
3. Add to income: Taxable portion added to your income
4. Pay tax: At your marginal rate

2024 Capital Gains Changes

Starting June 25, 2024, the inclusion rate increased for gains above $250,000:

Annual Capital Gains	Inclusion Rate
First $250,000	50%
Above $250,000	66.67%

For most individual investors, the 50% rate still applies.

Example: Taxable Account

Transaction	Amount
Purchase 100 shares FBTC	$5,000
Sell 100 shares FBTC (2 years later)	$12,000
Capital gain	$7,000
Taxable amount (50%)	$3,500
Tax owed (40% bracket)	$1,400

Adjusted Cost Base (ACB)

If you buy the same ETF multiple times, you must track your Adjusted Cost Base:

ACB = Total cost of all purchases ÷ Total shares

Example:

• Buy 100 shares @ $50 = $5,000
• Buy 50 shares @ $60 = $3,000
• Total: 150 shares, $8,000 cost
• ACB per share: $8,000 ÷ 150 = $53.33

When you sell, your gain is: (Sale price - ACB) × Shares sold

Superficial Loss Rule

If you sell an ETF at a loss and buy it back within 30 days (before or after), the loss is denied for tax purposes.

Workaround: Wait 31 days, or buy a similar but different ETF.

ETF Distributions

Some crypto ETFs pay distributions:

Distribution Type	Tax Treatment (Non-Registered)
Capital gains	50% taxable
Return of capital	Not immediately taxable (reduces ACB)
Dividends	Taxable as income

Most pure Bitcoin/Ethereum ETFs don’t pay regular distributions. Yield-focused ETFs (like BTCY) distribute monthly.

In Registered Accounts

Distributions in TFSA or RRSP have no immediate tax impact—they grow tax-free or tax-deferred.

Reporting Crypto ETFs on Your Tax Return

TFSA

• No reporting required
• Gains don’t appear on tax return
• Brokerage sends T5 only if over-contributed

RRSP

• No annual reporting for holdings
• Report withdrawals on T4RSP
• Track for retirement planning

Non-Registered

Report on Schedule 3 (Capital Gains):

1. Get T5008 slip from brokerage
2. Calculate ACB for shares sold
3. Report proceeds and ACB
4. Calculate gain/loss
5. Transfer 50% of net gains to income

Record Keeping

Keep records for at least 6 years:

• Purchase confirmations
• Sale confirmations
• ACB calculations
• Brokerage statements

Tax-Loss Harvesting

If your crypto ETF is down, you can sell to “harvest” the loss:

1. Sell at loss: Creates capital loss
2. Losses offset gains: Reduce taxable capital gains
3. Carry forward: Unused losses carry forward indefinitely

Example

Transaction	Amount
Realized crypto ETF loss	-$5,000
Other capital gains	$8,000
Net capital gain	$3,000
Taxable (50%)	$1,500

Without harvesting, you’d owe tax on $4,000 ($8,000 × 50%).

Rules

• Wait 31 days to repurchase same ETF (superficial loss rule)
• Or buy similar but different ETF immediately
• Can only apply to non-registered accounts

Common Questions

Is crypto ETF tax simpler than direct Bitcoin?

Yes. Crypto ETFs provide:

• T5008 slips for reporting
• Clear cost basis from brokerage
• No tracking of wallet transactions
• Standard capital gains treatment

Direct Bitcoin requires tracking every transaction across potentially multiple wallets and exchanges.

What if I transfer crypto ETFs between brokerages?

Transferring “in kind” (without selling) is not a taxable event. Your ACB carries over.

Are US crypto ETFs taxed differently?

In a TFSA, US ETFs may face 15% withholding on dividends. Crypto ETFs rarely pay dividends, so this is usually not an issue.

In an RRSP, the Canada-US tax treaty exempts you from withholding tax.

What if CRA audits me?

Keep records of:

• All buy/sell transactions
• ACB calculations
• Brokerage statements
• Any transfers between accounts

Can I deduct ETF management fees (MER)?

No. MER is built into the ETF’s performance, not a separate deductible expense.

Tax-Efficient Crypto ETF Strategy

Priority Order

1. TFSA first: Tax-free gains, most flexibility
2. RRSP second: Tax deferral, good for high earners
3. Non-registered: Only after registered accounts are full

Asset Location

If you hold multiple investments:

• Put high-growth assets (crypto ETFs) in TFSA
• Put income-producing assets in RRSP
• Put tax-efficient assets (Canadian dividends) in taxable accounts

Minimize Taxable Events

• Buy and hold when possible
• Avoid frequent trading
• Rebalance within registered accounts
• Use tax-loss harvesting strategically

Summary

Account	Tax on Gains	Best Practice
TFSA	None	Max this first
RRSP	Deferred	Use if TFSA full + high income
Non-registered	50% included in income	Tax-loss harvest, track ACB

Key takeaway: Use your TFSA for crypto ETFs. The tax-free growth is the most valuable benefit available to Canadian investors—take full advantage of it before using other account types.

Consult a tax professional for advice specific to your situation, especially for large investments or complex scenarios.